THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: It makes clean energy the profitable kind of energy. It invests in technologies like wind power and solar power, fuel efficient cars and trucks, powered by batteries like the ones I'll be seeing in Rosemead (ph) tomorrow. All of which will also help combat climate change because the weather's already nice in Orange County. We don't want it to get warmer.

(APPLAUSE)

OBAMA: So that's what this budget does. Now, here's what the budget does not do.

UNIDENTIFIED MALE: I love you Obama!

OBAMA: I love you back.

(CHEERING AND APPLAUSE)

OBAMA: Here's -- here's what the budget does not do. It does not raise the taxes of any family making less than $250,000 a year by a single dime.

(CHEERING AND APPLAUSE)

OBAMA: In fact, 95 percent of all working families will receive a tax cut as a result of our recovery plan. Now, there are those who say these plans are too ambitious. We should be trying to do less, not more. Obama's trying to do too much, they say.

(CROSSTALK)

OBAMA: Just focus on Wall Street, focus on the banks. Well, I say our challenges are too large to ignore. The cost of health care is too high to ignore. The dependence on oil is too dangerous to ignore. Our education deficit is too wide to ignore.

(APPLAUSE)

OBAMA: To kick these problems down the road for another four years or eight years, that would be to continue the same irresponsibility that got us to this point. I didn't run for president to pass on our problems to the next generation or the next president. I ran for president to solve these problems so that you've got a better shot at life.

(APPLAUSE)

UNIDENTIFIED GROUP: (Shouting Obama).

OBAMA: So...

UNIDENTIFIED GROUP: (Shouting Obama).

OBAMA: So I know folks in Washington and folks on Wall Street are saying no, no, no, one problem at a time, our problems. I understand the thinking behind that and it's true, we've got to solve this banking crisis. There's no doubt about it. Not because I'm that concerned about the bankers, but because I'm concerned about you.

And we've got to get liquidity and credit flowing again, to small businesses, to people who want to buy a car, who want to refinance a home. So I understand their thinking about solving that problem, but you know, I've said before, when you're president, you've got to walk and chew gum at the same time.

(APPLAUSE)

OBAMA: It would be nice -- it would be nice if I could just pick and choose what problems to face and when to face them and say no, I'm sorry, hold off on health care. Afghanistan, let's put that aside for a while and -- you know, I would sleep a little easier. But that's not the way it works. It doesn't work that way for you.

It doesn't work that way for you. You don't get to choose between paying your mortgage bills or your medical bills. You don't get to choose between paying your kid's tuition and saving enough for retirement. You don't get to say, well, I'm sorry, hold on a second, you know, I really got to take on some issues at home here so I don't think I'm going to go to work for a week.

It would be nice to do. But you don't do that. You need to take all these problems on. And you need a government that's going to help you on all these problems that will do the same. That's what leadership's all about.

(APPLAUSE)

OBAMA: And that's what this debate on the budget is all about. About whether we are willing to do what needs to be done not only to get our economy moving right now, but to put it on the road to lasting shared prosperity. It can be easy to lose sight of this. It's easy for pundits to get on TV and put the ratings ahead of their own sense of responsibility and try to oversimplify what's at stake.

It can be difficult to break free from the partisanship that's held sway in Washington for so many years. But that's what we have to do. That's what this moment requires. For all of you know deep down in what folks in Washington sometimes forget, in the end, a budget is not merely numbers on a page or a laundry list of programs, it's about your lives, it's about your families, it's about your dreams for the future.

You did not send us to Washington to stand in the way of your aspirations. You didn't send us there to say no to change. You sent us there to get things done and bring about change. And that's what I intend to do.

(CHEERING AND APPLAUSE)

OBAMA: But I can't do it without you. I can't do it without you, the American people. That's why I'm here today, because it will take all of us talking with one another and all of us working together to see our nation through this difficult time and bring about that brighter day. So I hope you're all ready to get to work.

(APPLAUSE)

OBAMA: I want to thank you all for this opportunity to speak with you. Here's what we're going to do. We're going to open it up to questions.

WOLF BLITZER, CNN ANCHOR: All right, the president of the United States wrapping up his opening remarks. He's about to start taking questions in Costa Mesa, California. Our coverage of the presidential town hall meeting will continue right after this.

(COMMERCIAL BREAK)

BLITZER: The president was just asked if he wants to run for re- election in 2012. He says if he can get done in four years what is necessary to get done, he'd rather be a president for four years and get the job done than be a president for eight years without getting the job done. He's continuing to answer that question.

OBAMA: ... four years from now, then I think you will be answering the question of whether I run for re-election or not because ultimately I'm answerable to you. I'm your employee, OK? All right, gentleman in the black shirt right here. Yes, sir.

UNIDENTIFIED MALE: My name is Cliff Cannon (ph). My question concerns those states who have refused to take certain portions of the stimulus money. Is there any way to reallocate that money to those states who are willing recipients...

(LAUGHTER)

UNIDENTIFIED MALE: ... such as California?

(APPLAUSE)

OBAMA: Well, look, yes we had a vigorous debate on the stimulus, on the recovery act. And let me just say a couple of things about the recovery act. Number one, there was almost uniform consensus among both conservative and liberal economists that when you have the economy on such a free fall, that you need a big stimulus to try to make sure that goods and services are still being purchased and that the decline in demand as consumers pull back is being filled.

If you don't, then the recession gets even worse. There's almost uniform consensus on that. So that's point number one. Point number two, the recovery act that we put forward contained some -- some provisions in it that I don't think anybody should be able to argue with, that we're providing extended unemployment insurance to people who've lost their jobs. That we are allowing -- if you've lost your job, right now you can get COBRA, but you can't afford COBRA, so subsidizing health insurance for people who've lost their jobs, investing in our roads and our bridges and our infrastructure so that we are more competitive over the long term.

Now, there are some people -- there have been just a handful of states, two or three, who said, we don't want to take some of the unemployment insurance because what we said was that a portion of this unemployment insurance, you have to make it more available to people who are temporary workers or part-time workers because the labor force has changed and there are a lot of people, particularly women, who, you know, they may have children, they may be working part time, but when they lose their job, it's tough for them, so we've got to modify how we think about unemployment insurance, and they said, well, we don't want to change how we do things.

I think that's a mistake. And I think that the folks in those states should let them know that it's a mistake. And I'm still hopeful that they may end up changing their minds. But I will keep in mind what you just said, which is there's at least one guy in California who's willing to take the money.

(APPLAUSE)

OBAMA: So -- can I make one last point? I hope you don't mind. Can I make one last point about this stimulus package? I want to make a larger point about the deficit and the national debt. Because the main argument that you're hearing right now in opposition to some of our economic plans, including our budget, is you've got all this money going out, you're creating huge deficits and debt, and that's irresponsible.

Well, first of all, most of these critics presided over a doubling of the national debt. We are inheriting a $1.3 trillion deficit, so they don't have the standing to make this criticism, I think, given how irresponsible they've been. That's point number one. Having said that, even somebody who caused the problem isn't wrong when they say it is a problem that we've got this big debt and these big deficits.

So what we've tried to do is to say let's right now just focus on getting the economy back on track, reducing unemployment, creating jobs, making sure our school systems still have teachers, cops are still on the streets, firefighters are still in the station house. Let's -- let's do what we need to do to get through this difficult time. Let's make some investments in health care, energy, education that will lay the foundation for long-term economic growth, but let's also start making some tough choices about the deficit as soon as we get out of this recovery.

So, for example, we can't keep on providing the insurance companies huge subsidies under Medicare for a program called Medicare Advantage that doesn't make our seniors any healthier than the regular Medicare plan. We need to go ahead and use that money for other things. We can't keep on giving these huge procurement contracts to defense industries that end up being 50, 60, 100 percent over budget -- very good for contractors, not so good for taxpayers, so we've got to institute reforms and we've already identified potentially pulling $40 million out annually in savings on procurement.

Yes, those are the kinds of things -- those are the kinds of steps that we need to take and we are going to go through this budget line by line. And some of these choices may be difficult. I won't lie to you. We can't keep on just printing money and saying we'll let our children worry about it. But we have to do it in a way that right now focuses on just getting people back on their feet, getting the economy running again, and then we're going to have to make some difficult choices, especially over some of these longer term entitlements like Social Security and Medicare.

All right -- this young lady right here. Hold on a second, we've got a mike, right here, right here, right in front -- yes.

UNIDENTIFIED FEMALE: Thank you. Hello, Mr. President.

OBAMA: Hello.

UNIDENTIFIED FEMALE: My name is Joan Airheart (ph) and I'm a Community bank SBA lender and have proudly been one for 20 years. We're very, very excited about the stimulus package and we are going to do everything we can to get the money out there, including financing the construction projects that you're talking about. However, as a lender and as a bank, we have a problem that I feel needs to be addressed.

When we make loans that are less than the normal quality, even with the SBA guarantee, the regulators tend to criticize us, and when they criticize us, they make us set aside reserves as if the loan is going to be bad and that eats into our capital. That's part of the problem that the banks are having right now and why they needed the TARP money.

Not all banks are bad banks, as you know and as a community bank that's been around for 85 years we haven't even taken TARP money. We want to make SBA loans. But we don't want to get our hands slapped by the regulators when we try to help these people and last year is going to be a less than stellar tax return for everybody that's had a problem that is going to come to the SBA for help. Will you be able to speak with the regulators and set some kind of new bar so that we won't be criticized and we can actually go out and loan this money that we want to?

OBAMA: Well you make -- you make a terrific point. This is an excellent point. Let me...

(APPLAUSE)

OBAMA: Let me -- let me say a couple of things on this. First of all, just so everybody caught the issue here. There are a lot of community banks, smaller banks, local banks, that did not act irresponsibly. They weren't involved in, you know, buying some of these weird financial instruments that didn't work. They're not paying out $100 million bonuses. You don't look like you got a $5 million bonus.

(LAUGHTER)

OBAMA: You wish, right? Yes, they're working with local businesses, small businesses, small contractors. They take in deposits. They do what banks are supposed to do. They're still having some problems, local community banks, and they're having problems in two areas. Number one is a lot of these community banks give Small Business Administration loans, SBA loans, that are guaranteed by the federal government, but the problem is, is that historically what they've done is they get the loans and then they sell them on what's called the secondary market.

They sell them to other parties who invest in these loans. The problem is all these secondary markets have all frozen up right now because everybody's so nervous about all these losses that have been happening on Wall Street. So we just announced this week a program that will allow the Treasury Department to buy these loans directly from the community bank, so if you've got $5 million worth of loans, SBA loans, already on the books, you can sell them to Treasury. That will then mean that you'll have $5 million that you can now put back to work, providing loans, without worrying about your capital, your capital ratio.

So that's -- so we'll -- you should find out -- this is on our Web site, the White House Web site, it will tell you about this program. Now, you're right, though, that we still have a problem that a lot of small businesses are seeing their credit lines restricted and part of that has to do with the issue you're talking about, which is regulators may be saying to banks, look, we're worried about all these losses so pull back on what you consider riskier loans.

Well, if you've got a credit line to a small business and they're seeing some of their business dry up right now, then you might be saying to yourself maybe I can't continue that credit line. We don't have direct authority -- the White House does not have direct authority over these regulators. These regulators are supposed to be somewhat independent from politics. But, you know, we have had conversations to note that during a difficult period like this, we want to make sure that the bottom line is ultimately that liquidity and lending is going out the door and I think that we're going to be having broader conversations with the community banks to figure out how can we take even further steps to help them be in a position to help the small businesses and individuals who depend so much on banks like yours? OK...

BLITZER: The president of the United States is going to continue answering questions at this town hall meeting. And our coverage will continue right after this.

(COMMERCIAL BREAK)

BLITZER: The president of the United States making a strong case for comprehensive immigration reform at this town hall meeting in Costa Mesa, California. OBAMA: You've got to -- and then you've got to say to the undocumented workers, you have to say, look, you've broken the law. You didn't come here the way you were supposed to, so this is not going to be a free ride. It's not going to be some instant amnesty. What's going to happen is you are going to pay a significant fine. You are going to learn English. You are going to -- you are going to go to the back of the line so that you don't get ahead of somebody who was in Mexico City applying legally.

But after you've done these things over a certain period of time, you can earn your citizenship. So that it's not -- it's not something that is guaranteed or automatic. You've got to earn it. But over time, you give people an opportunity. Now, it only works, though, if you do all the pieces. I think the American people -- they appreciate and believe in immigration.

But they can't have a situation where you just have half a million people poring over the border without any kind of mechanism to control it, so we've got to deal with that at the same time as we deal in a humane fashion with folks who have put down roots here, have become our neighbors, have become our friends. They may have children who are U.S. citizens. That's the kind of comprehensive approach that we have to take, all right?

(APPLAUSE)

OBAMA: OK.

(APPLAUSE)

OBAMA: All right, I promise to go back there. I promise to go back there, but I can't see anybody so -- but it's a girl's turn, it's a lady's turn.

(CROSSTALK)

OBAMA: There's a whole bunch of folks just kind of waving. One young woman from the back, just go ahead and -- somebody with a mike go find somebody. There you go.

UNIDENTIFIED FEMALE: I just love you, OK. Our class sizes are between 36 and 44. This is normal. I've been in the district for over 25 years. I have seen what our kids can do when someone cares. The "Teacher of the Year" also received a pink slip. We're talking about quality teachers being laid off because of something. I don't know what.

Tomorrow we have a meeting. My next -- my real question is you have put money towards retention. How are we going to make sure that money comes to our districts that need it the most, the urban districts?

OBAMA: Well, look...

(CHEERING AND APPLAUSE)

OBAMA: We -- most of -- almost all of the money -- almost all of the money that's going to states under the recovery act for education is designed to retain teachers, almost the lion's share of it. I mean there's some money for school construction as well. And there's some money for innovation.

Because we can't just put more money into the schools without also reforming the schools and making them better. But a huge -- right now, the biggest chunk is for teacher retention. It generally flows in the same way the Title One moneys flow, so that there should be a formula that the states are working with in terms of how it's allocated to various districts.

I don't know the exact figures here in California or what would happen in term of this school district. Your school superintendent is here though. There he is, right here. So -- wait, wait, wait, wait, wait, hold on a second, hold on, hold on. Hey, hey, hold on a second. It's not his fault that the state's run out money.

So he is going to -- he is going -- he was in a meeting with Arne Duncan (ph), our Secretary of Education, and I stopped by in the meeting, and these were the school superintendents for all -- all across the country to come together and work on how do we both deal with the immediate short-term crisis, but also how do we think about long-term reforms. You're right that class size is something that we've got to deal with. You can't have a fifth grade class with 40 kids. There's no teacher who can deal with 40 kids all at the same time, especially if many of them are at different level in terms of reading and math skills and so forth. So we've got to do something about that.

But what's also true is we've got to provide better teacher training. There are teachers who may not know their subject matter as well as they should. They've got to be given more time to -- for professional development. We've got to have more flexibility, I believe, in terms of how we reward teachers.

I think that it is important for us to make sure that we have assessments that everybody can agree because ultimately we've got to know our kids are meeting high standards. It can't just be a single high-stakes standardized test but we do need to have strong powerful measures of performance because schools are like anything else. We can't afford our kids to be mediocre at a time when they're competing against kids in China and kids in India who are actually in school about a month longer than our kids. So there's a whole bunch of reforms that we're going to have to do.

And the last point I always make, so I'll make this again, is we've got to do our jobs as parents. You can't put all the burden on a teacher. You can't put all the burden on a teacher if you're not making sure your child does their homework, if you're not reading to them, instill ago sense of excellence and a thirst for knowledge in them, then they're not going to do well no matter how good your teacher is. OK, so that's very important.

One last point I want to make about education. This budget that we are now arguing about -- and you're going to be hearing a bunch of arguments about, oh, you know, Obama, he's a spendthrift, et cetera, et cetera. We reduced non-defense discretionary spending as a percentage of domestic product but we insist on is that we make some investments in education. One of the things we haven't talked about is higher education. I've said we've got to increase student loans, student grants, the Pell Grant Program, that's got to be a priority. That's our future. And I'm going to fight for it. I don't care how long it takes. We're going to make it more affordable to go to college. Because that's what everybody needs.

All right. We need a gentleman. In the tie, right here. Says he wore a tie today. I appreciate that. All right.

UNIDENTIFIED MALE: It's awful hot.

OBAMA: It's hot. I want to take mine off, too, but --

UNIDENTIFIED MALE: I'm Bob, President of the State Building and Construction Trades Council of California, the umbrella organization for construction unions. I would like to thank you for your leadership on the stimulus package, and for particularly, for trying to get construction workers back to work. But during the last eight years, the administration chose not to enforce the Davis/Bacon requirements, chose not to enforce wage an hour conditions and many thousands of workers were denied the wages they were legally entitled to. What can your administration do to make sure that people get the wages that they are entitled to in this terrible economic downturn?

OBAMA: Well, look, I've already said that we are going to promote Davis/Bacon. We think it is important that unions have the opportunity to organize themselves.

Now, you know, sometimes, you know, the business press says, that's anti-business. And whenever I hear that, I'm always reminded of what Henry Ford said when he first started building the Model T. And he was paying his workers really well. And somebody asked him, they said, why are you paying your workers so well? He said, well, if I don't pay them well, they won't be able to buy a car. Think about that.

Part of the problem that we've had with our economy over the last decade at least is that -- well, there are a number of problems. Number one, it turns out that a huge amount of the growth that was claimed was in the financial services industry. And now we find out that a bunch of what stuff was just a paper growth that wasn't real and vanished as soon as somebody pulled the curtain.

Another part of the problem with our economy in the way it was growing was that wages and incomes for ordinary working families were flat for the entire decade. Now, I don't need to tell you this because you've experienced it in your own lives. You're -- just barely kept up with inflation while people at the very top -- and, look, I'll be honest with you, I'm now in that category -- we were seeing all the benefits.

So when I say that we should make it easier for unions to organize and observe Davis/Bacon, all I'm trying to do is restore some balance to our economy so that middle class families who are working hard, they're not on welfare, they're going to their jobs ever day, they're doing the right thing by their kids, they should be able to save, buy a home, go on a vacation once in a while, you know, they should be able to save for retirement, send their kids to college. That's not too much to ask for. That's the American dream. And the only way we get there is if we have bottom up economic growth instead of top down economic growth. And that's why -- that's why the debate about this budget is so important.

Let's talk tax policy for a second. Because, again, some on the other side have said, oh, Obama, he's a tax and spend Democrat. Tax and spend. Well, it turns out, yes, you know what I've said is we should return to the tax rates that we had under Bill Clinton. Which means -- which means this, which means that for people who are making more than $250,000 a year, they would pay, instead of 36 percent, they'd pay 39 percent. Three percent increase on their tax rate. Now, these folks can afford it. They were rich -- they were rich back in the '90s. It's not like suddenly they're going to have to go to the poor house. But what that does is it allows us to pay for health care reform for a lot of people who are out there working every day about are just one illness away from bankruptcy.

Now, that's -- I don't think that's unreasonable. I don't think that's socialism. I think that's part of understanding that we're all in this together and that if the middle class is doing well, if working people are doing well, then everybody does well, then they can buy products and services and businesses will succeed. That's the philosophy that we are pursuing in this budget. That's why I need your support. I'm going to take two more questions. Two more questions.

BLITZER: All right, the president of the United States continuing his town hall meeting in California.

(COMMERCIAL BREAK)

BLITZER: The president was asked if he supports a cap on credit card interest rates. He said he supports a credit card bill of rights. Listen in.

OBAMA: Generally speaking, if you're just running up your credit card and you don't think there's a bill to be paid, you've got problems. So all of us I think have to be more thoughtful about how we use them and ultimately we've got to take responsibility if we are going on shopping sprees that we can't afford. On the other hand, it's also important that we have consumer safety laws and that's something I want to promote and get done as president of the United States.

Now, let me talk about the larger issue of banks just for a second. Because a lot of people I know just are so frustrated and I am so frustrated with this banking situation. I just want to just briefly explain to you sort of what's happened. These banks purchased a lot of what are securitized mortgage instruments. They took a lot of these loans and bundled them up. They weren't just holding a mortgage, they were holding a whole bundle of mortgages that were made into a security, a stock, and they were sliced up. And so you could buy different pieces of these mortgages.

And unfortunately, what ended up happening was a bunch of these mortgages, and this was certainly true in California, that's true all across the country. A bunch of these mortgages are from people who never had the income to buy the house, nobody tried to verify whether or not they could actually afford it. It was based on these complicated mathematical formulas. And then what happened -- and this is where AIG and some other companies come in -- what happened was since the banks knew that there might be some risk around having these financial instruments, they bought these things called credit default swaps that were supposed to be guarantees or insurance on these instruments or on these securities, these mortgage-backed securities.

The problem was, companies like AIG, they'd sell, like, 50 policies without having the money to cover the possibility that they were all go belly up. So they were way overleveraged, overextended, just as the banks were way overleveraged and overextended. In some cases, they'd take a dollar worth of assets and they'd loan or use 30 dollars off that one dollar just to make bigger and bigger bets out in the financial system. These started getting into trillions of dollars. And as long as nobody was checking to see if anybody was going to be able to pay back these mortgages and as long as housing prices were appreciating, and this housing bubble was continuing, everybody was making a lot of money. So nobody wanted to check. And there was no serious regulation to say hold on, stop a minute, you guys are getting way overextended. You're putting the entire financial system at risk.

So when the economy started slowing down and in some markets like Miami and here in California, the housing market starts really weakening and suddenly so many of these subprime loans start defaulting, this whole house of cards just begin to collapse.

Now, a lot of people say, well, why not just let the banks fail? Right? See, somebody's clapping. Why not just, you know, they were making all these bad bets. Why don't we just let them fail, let them go bankrupt, what's the problem? Well, here's the problem. If you just got one small bank, I mean, unfortunately, let's say, take the community bank -- what's the name of your community bank? Fullerton Community Bank. All right.

Now, let's just say this, if Fullerton Community Bank fails, heaven forbid, we've got something called the FDIC, the federal deposit insurance corporation that would take it over, it would guarantee all the deposits so you don't have to worry about your deposits. There are not at risk. And it would be able to kind of sort things out and then resell the bank fairly quickly and it doesn't threaten the system as a whole.

When you've got big banks, Citicorp or Bank of America or, you know, Wells Fargo that controls 70 percent of the banking system, and all of them are weakening, you can't afford to have all those banks all at once start going under. Even though the deposits might be guaranteed, you've got the entire economy resting on that credit. We've got to get that credit lending because they can take down businesses large and small alike if we don't make sure that they are still providing loans and so we had to step in and it was the right thing to do, even though it's infuriating, even though it makes you angry because you're thinking, I was responsible and these folks are irresponsible and somehow I'm paying for them. It was the right thing to do to step in. The same is true with AIG. It was the right thing to do to step in.

Here's the problem. It's almost like they've got -- they've got a bomb strapped to them and they've got their hand on the trigger. You don't want them to blow up. But you've the good to kind of talk them, ease that finger off the trigger. We've got to, over the next several months, come up with a plan that separates out the bad assets that -- the loans that shouldn't have been made, these credit default swaps, et cetera. We've got to separate out some of those from the good assets, because there's a lot of very healthy banks. The vast majority of banks are healthy. We've got to figure out how to raise their capital, the point that you were making earlier so that they can start lending again. This is a very complicated difficult task. It's not easy. We're talking about a huge system that's not just national, but international.

And so we're not going to unwind this all in a day. But what I do have confidence in is that with the plans that we're putting forward, slowly you're starting to see the system stabilize. You're starting to see more loan activity taking place. Some of the security markets are coming back. And if we continue to provide so many guarantees and help depositors and help strengthen some of the banks that are weakened, then my expectation is we're going to be able to work our way out of this problem and we're going to be able to get back to a point where banks are lending, businesses are investing, jobs are being created, and the economy gets back on its feet and when that happens, we should get a bunch of the money that has been lent to these banks back.

Now, we're not going to get all of it. I just -- you know, we're not going to get 100 percent of it back in some cases. In some cases, we may get 100 percent back. In some cases, we may even make a profit. I don't want to pretend this is going to be cheap. But the point is, that instead of looking backwards, the main thing we've got to do is look forwards and say, how do we make sure that we get out of this mess, but also prevent this mess from ever happening again, and that requires the kind of financial regulation that's going to be so important for our long-term future.

All right. I've got -- it's a guy's turn. It's a man's turn. And he's got the last -- this gentleman, because he's big and I don't want him to be mad at me.

UNIDENTIFIED MALE: Good afternoon, Mr. President.

OBAMA: Good afternoon.

UNIDENTIFIED MALE: My name is Dwayne Webber. Thank you for taking the time to listen to me. Last October, I lost my job after 13 years. I was laid off. Now, I'm looking for a job, people tell me I have a felony from 20 years ago, I can't get no work. I have a family to support. What do I do?

OBAMA: Well, first of all, I know how hard it is for you right now being out of work because I can tell you've got pride, you've been working, you've been supporting your family, and one of the things that's been happening in this most recent recession is men have actually been losing jobs faster than women. And that is a very difficult thing. I mean, I know that I take great pride in, you know, taking care of my family. And it's hard when you lose your job. The fact that you've been working steadily for 13 years, post-felony, seems to me a message that you made amends for your past mistakes and that you are rehabilitated, and that you've proven yourself in the job market.

So in that sense, I think you're actually better off than a lot of folks who make mistakes and then never get that first job that allows them to rehabilitate themselves. They've got no employment history. They're just an ex-felon, they go in and nobody gives them the time of day and oftentimes they end up getting back into trouble.

Now, we're trying to set up some programs to help ex-felons make that transition. Based on what you're telling me, your problem is a problem that has nothing or less to do with your felony than the fact that the job market is really tough right now. And that's why all I can tell you is we are working as hard as we can to invest in construction and infrastructure, to invest in things like clean energy, building solar panels and wind panels and -- wind turbines and other things that point to a new manufacturing base and a new energy future. We're trying to create the jobs of the future and we're trying to get this economy moving again, fix the banking system, so that you start seeing more economic activity. I have confidence that you will find a job. I have confidence in you. But in the meantime, in the meantime, the most that I can do is to make sure that you've got unemployment insurance that you can rely on, that you've got C.O.B.R.A. that you can rely on, that your family's able to get some support during these difficult times, and they try to get these jobs created as quickly as possible. What kind of work did you do? You worked in what?

WEBBER: I worked in the auto industry, for Toyota.

OBAMA: The auto industry. Let's talk about the auto industry for a second. First of all, you worked for Toyota which is obviously one of the best companies and so you -- when Toyota's having problems and laying off, that tells you how tough the problems are in the auto industry right now. We are going to have to work to move in the direction of fuel efficient cars and trucks. I would have expected you to say you were working for an American car company because they're having much bigger problems. The future's going to be in fuel efficient cars. It's going to be in these plug-in hybrids. It's going to be in developing the battery technology that allows electric cars to run for 150 miles for every gallon of gas. And what we need to do is to invest in research and development around this clean energy auto technology.

One of the things we've committed to doing in our budget is to spend $15 billion every single year in new technologies that maintain cutting edge auto technologies that will ensure that good efficient clean cars are made right here in the united states of America and hopefully we're going to put you back to work in the process so --

BLITZER: The president of the United States, wrapping up more than one hour of town hall meeting in Costa Mesa, California. We're going to digest what we just heard from the president with the best political team.

(COMMERCIAL BREAK)

BLITZER: We're back with Gloria Borger, Steve Hayes and Roland Martin. What did you think about this town hall meeting?

GLORIA BORGER, CNN CONTRIBUTOR: This was a great venue for this president. He came out taking responsibility for those bonuses for AIG. He said, blame me, because I'm the president of the United States. Then he went on and explained what we need to do to save the banks.

BLITZER: He's pretty good in those town hall meetings.

STEPHEN HAYES, CNN CONTRIBUTOR: He's good. I didn't think this was one of his better performances. To me, there was a lot of dissidence here between what we've seen in Washington. At one point, he described -- said everybody in Washington was in a tizzy. I think this is bigger than a Washington problem. I think you have everybody across the country in a tizzy. There's a bit of a disconnect when he's out in California talking about building wind turbines when people want answers about AIG.

BLITZER: Roland, what did you think?

ROLAND MARTIN, CNN CONTRIBUTOR: Anytime you get a Washington, D.C. -- and it is a very smart thing, I thought what he was trying to do was say, look, those folks back there, you see exactly what they're doing. What we're doing out here outside of Washington, D.C. is important. I think he hit on the important things. He kept selling the budget. And so he had so many great questions from the audience. Even asked him straight up what is he going to do about illegal immigration? He talked about everything else, with immigration reforms. I thought some great questions from the audience.

BLITZER: Good questions, good answers. Our coverage is about to continue. We're not going away from this story. I've Wolf Blitzer in "THE SITUATION ROOM."